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Read on to see an article posted on the OMG blog on 7 January 2019:

Twilight Zone

After an indifferent start the FTSE 100 improved 1.55% to 6,837, while the AIM All Share increased by 2.81%.  The US reported that employment had improved more than expected and  the FED hinted on a slower pace of interest rate increases in 2019. This may be supported by the FOMC minutes which are reported on Wednesday.

Also, on Wednesday the BOE Governor makes another ineffectual speech, due to the  necessary Brexit  caveats. There is a list of UK economic figures on Friday with GDP, the most watched is likely to show a stagnant 0.1% month-on-month raise.

The twilight market continues as its neither day or night.

This is not a reporting season, so we will concentrate on Reviews and the 10 Shares we think could more than double in 2019. 

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Reviews

SYS – 39p – Clouds lifted
PCA – 315p – Liverpool buy
JSG – 122p – New laundry investment
7DIG – 0.8p – Juke concerns
GTC – 32p – Large one-off sale
SFOR – 119p – Organic growth


Reviews

Sysgroup (LSE:SYS)
39p (38p/40p)
Mkt Cap: £9.6m
Next Results: Finals June

The institutional selling pressure seems to have cleared at this reinvented IT company as Livingbridge VCT have emerged with nearly 20%. SYS’s new strategy has successfully won three-year managed hosting services contract worth £1m with Home Bargains, one of the UK’s largest high street discount retailers.

After some false starts the focus is on a client’s strategic and operational IT requirements – enabling clients to free up resources, grow their core business and avoid the distractions and complexity of delivering IT services. It Won Security Vendor of the Year at Computing Security Excellence Awards SYS’s managed service offerings include all forms of Cloud hosting (private, public and hybrid) but also outsourced service desk and various IT consulting services including public cloud (Azure and AWS services). The market for managed and cloud services is large and long term, driven by the structural move to cloud delivered solutions and IT outsourcing in general.

The interims to September reported a 47% increase in revenue £5.3m with EBITDA 300% higher at £0.56m .This included a full contribution from an acquisition, but organic growth was a respectable 20%. This momentum is expected to continue.

Financials
After paying for acquisitions the company moved from net cash to debt of around £0.84m with a cash inflow of £0.79m.

Trading Strategy
The recovery has been successfully supplemented with acquisitions and recovery could move into profitable growth.

Last OMG! Price 39.5p


Palace Capital (LSE: PCA)
315p (310p/312p)
Mkt Cap: £144.4m
Next results: Finals, May

Palace Capital (LSE: PCA) has reinvested part of the £18.4m sale of non-core residential properties in a mixed commercial property in Liverpool. This will add rents of £1m in a full year.

Palace paid £14m for the 70,000 sq ft One Derby Square, which is 96% occupied.
Underlying NAV is expected to be maintained at 415p a share at the end of March 2019. The full year dividend could remain at 19p a share even though it would not be covered by earnings – although cash generated from operations could be similar to the total cost of dividend. The yield is 6%.

Allenby believes that Palace has another £16m available for investment. Investing this cash will enhance income. There is a 24% discount to underlying NAV.

Trading strategy
Attractive.

Original recommendation: 330p/338p

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Read more sample articles:

17 Mar – Distant Horizon

24 Feb – And the winner is…

18 Dec – Year End Review

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